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Tuesday, July 15, 2003

Greenspan Sees No Bottom Limit to the Fed Funds Rate

Correcting a lot of the recent interpretation about how low Big Al was prepared to go, the man himself has now made it clear: there is no bottom limit above zero. Meantime the recent news is definitely on the optimistic side. Let's just all hope they're right.

Federal Reserve Chairman Alan Greenspan said on Tuesday there is no level of the federal funds rate below which the Fed would not cut interest rates further, even though there may be an impact on some financial institutions. "I don't see that there is a downside to what we can do conventionally," Greenspan told the House of Representatives Financial Services Committee in response to a question. "I don't envisage that will be necessary but to presume that there's a certain level that's often been stated, say 75 basis points, that that's as low as we can go -- I think that is mistaken. I think we have far more flexibility than is implied in that question," he said. The Federal Reserve cut interest rates to a 45-year low of 1.0 percent last month, and many in financial markets speculated it would be reluctant to cut rates much further.
Source: Forbes
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About

Edward 'the bonobo' is a Catalan economist of British extraction based in Barcelona. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

He is currently working on a book with the provisional working title "Population, the Ultimate Non-renewable Resource".

Apart from his participation in A Fistful of Euros, Edward also writes regularly for the demography blog Demography Matters. He also contributes to the Indian Economy blog . His personal weblog is Bonobo Land . Edward's website can be found at EdwardHugh.net.